Scramble is on for BP shares

Investors across the globe scrambled yesterday for a slice of the 170 million shares in British Petroleum that were offloaded by the Kuwait Investment Office late on Wednesday night.

Goldman Sachs, the US investment house, was inundated with orders for the shares that were apparently offered at a knock-down price of 716p in what was one of the largest block sales on the London stock market. A spokesman for Goldman said there were "significant institutional buyers in the US, continental Europe and the UK".

Dealers said there was no question that the block sale was comfortably oversubscribed. One said most of the stake had probably gone to US institutions which, by historical standards, were holding a relatively small proportion of BP's stock.

BP's shares retreated 20p to 724.5p yesterday but brokers said the decline was likely to be short-lived while the 3 per cent stake in BP was washed through the system. "The fact somebody sells shares does not change the fundamentals of the company," said Paul Spedding at Kleinwort Benson.

Shawn Reynolds, oils analyst at Lehman Brothers, said news of the placing was "not overly surprising", with strong rumours that the KIO was about to offload its stake circulating in the market six weeks ago: "The only thing that is a surprise is the rumoured discount at which the shares were bought."

The secretive KIO declined to be specific about its reasons for the disposal, which reduces its stake in the oil company to 6.3 per cent, other to say it was a "rebalancing exercise".

The KIO picked up slightly more than pounds 1.2bn from selling the stake. The total gain for the KIO was more than double at pounds 2.6m after adding in the dividend income on the shares, which it has held since the late 1980s, and the share price gain over the years.

The KIO built up its holding in BP in what turned out to be an embarrassing exercise for the UK government, which put up for sale a large tranche of shares just before the 1987 stock market crash. BP later bought back part of the holding from the KIO.

A spokesman for the KIO said yesterday: "The holding of British Petroleum shares has come to represent a disproportionate part of the Future Generation Fund of Kuwait and this is why this rebalancing exercise is being undertaken."

BP's share price has been one of the best-performing among the world oil majors, enjoying a lengthy bull run that started in 1993 when the stock could be bought for less than 300p.